Premier Inn’s owner Whitbread said on Wednesday that a shrinking supply of budget hotels in the UK will strengthen its pricing power for years to come.
02.10.2023 - 21:21 / skift.com / Brian Chesky / Christopher Nassetta / Sean Oneill / Chris Nassetta / Hilton Hotels
Many people assume that hotel operators and short-term rental managers are fighting for the same customers. But they’re not, said executives at last week’s Skift Global Forum 2023. Hotels tend to attract guests with different needs than short-term rentals do, the industry leaders argued.
Yet what’s true today may not be true tomorrow, based on growth ambitions from hotels and Airbnb — which point to increased competition for the same customers.
For now, it’s a peaceful coexistence, said both Hilton’s CEO, Christopher Nassetta, and Brian Chesky from Airbnb.
“I never felt that for Airbnb to win, hotels had to lose,” Chesky said. “The evidence of that is that Airbnb had approximately 400 million guest arrivals last year. Last year, hotels had revenue and profits significantly higher than before we started… There is overlap [between hotels and Airbnb]. But there is less overlap than anyone realizes.”
Attempts to professionalize the management of short-term rentals to make them more hotel-like have had mixed results, too.
“On balance, the companies with lots and lots of properties — I’m not going to name any names — they generally have lower five-star reviews,” Chesky said. “As companies get really big, they have trouble maintaining the quality control. How do you industrialize hospitality without feeling commoditized and while still feeling personal…. You may not have the efficiencies of a hotel.”
Hotels have long argued they provide a more reliable and consistent service. “In the end, what they do and what we do are different,” Nassetta said.
Hilton’s focus groups found that many customers turn to short-term rentals if they’re traveling in “larger groups or for more extended stays where people need a facility like a kitchen or where they’re looking for a real value proposition because a group has different people of different means.”
But the future of lodging will more likely involve rising fights as hotels and short-term rental providers go after the same travelers.
For example, one group that currently prefers short-term rentals is people seeking extended stays.
“Roughly half of our nights booked are for stays longer than a week,” Chesky said. “Hotels don’t really serve that need that well.”
Yet hotels have been eagerly expanding into extended-stay and serviced- or micro-apartments. Hilton, for example, is touting an as-yet-unnamed brand it’s about to launch in the extended-stay space.
Hyatt last week revamped its vacation rental business with a plan to grow its hosting of travelers in homes for lengthy stays. Since October, several hotel groups, including Marriott, Wyndham, and BWH (Best Western), have also launched extended-stay brands, while Extended Stay America has been growing rapidly. Roughly
Premier Inn’s owner Whitbread said on Wednesday that a shrinking supply of budget hotels in the UK will strengthen its pricing power for years to come.
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